Successful Business Succession Planning: Part I

Business Continuity Planning by Regents Bank

Succession Planning and the development of a comprehensive and effective business succession plan for a business can be a complex process. There are many important decisions to make that will have long term effects on ownership, employees and, at times, family members. Having trusted advisors assisting with this planning often times makes the difference between a smooth transition or one filled with obstacles.

Among the many decisions that must be made are:

  • Will the current owner(s) retain any equity position?
  • Will there be an agreed upon time period for current ownership to remain on board and assist with the transition for the new ownership or management team?
  • Where will the funding come from for a buyout? (Employee Stock Ownership Program (ESOP), previously funded Buy/Sell Agreement, Owner financing, third party financing etc.)?
  • If there are several interested parties in taking ownership, which will be the best fit and offer the greatest chance of successful continuation of the business?
  • Which advisors will be called upon to help make unbiased decisions that current ownership sometimes find difficult to make?
  • In the event a family business is being passed on, do family members expressing an interest in taking over the business have the business acumen and skills to successfully manage the company?

In addition to the myriad of decisions that need to be made, business succession planning also may carry with it obstacles that complicate the process, such as:

  • Transitioning to new ownership without adversely affecting the day-to-day operations of the company.
  • Ensuring the company has the necessary working capital to continue operations, while at the same time assuring that current ownership will have sufficient funds to sustain retirement throughout their life expectancy.
  • Having sufficient liquidity for payment of transfer taxes.
  • Dealing with the concerns of employees that are experiencing insecurity over the unknown effects of a change of ownership.
  • Maintaining the existing client base through the reassurance and communication that they will be receiving the same high quality levels of products and service under the new ownership.

Ownership of a business is not only the numbers on a balance sheet, there is most often an emotional connection between owner and business. Years of hard work growing the company, personal relationships built with employees, clients and suppliers can take an emotional toll as succession is executed. This is why objective, third party advisors can help ensure that the business succession plan is well thought out and free from personal biases.

The Regents Bank team of experienced business bankers has assisted many companies in successfully designing and executing a well thought out succession plan that will benefit all parties. With offices in San Diego, La Jolla, Carlsbad, El Cajon and Vancouver, WA a Regents banker will meet with you to talk about how you can “pass the torch” successfully. We look forward to assisting.


Posted on September 28, 2011, in Banking Services and tagged , , , , , , , , , , , , , , . Bookmark the permalink. Leave a comment.

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